How to get kids interested in money management

A few years back, I took my entire M. Sc class to lunch. Don't remember why. They probably coerced me into it! As someone who never eats outside, I was clueless about pricing and was trying to get a rough estimate as they wanted to go to a high-end place (relative to the campus cafeteria!). One of the students said, "Why worry sir! Just use your credit card. Swipe karo!" The student was no kid. He was about 22!

Is that how credit cards work?! You swipe and forget about it!? I ask because I don't own one. Perhaps we should ask those who use credit cards for emergencies.

I think the need to get kids interested in money management cannot be overemphasised. Interested, not teach. You start teaching and they run away.

Here are a few thoughts on this subject. I am a father of a 4.5 year old. So let me not pretend to know much about parenting children above that age. That said, I am fairly convinced that the following would work.

1) Let them touch and feel money at an early age. Let them see it change hands. Let us try not to use credit or debit cards in their presence because they should feel a sense of loss when a purchase is made.

2) Sooner or later they are going to want something or the other. Be it a fancy tablet, mobile, i-pod, whatever, if we can't afford it, let us say a firm 'no'.

If we can afford it, let us ask our kids to research on similar products available for at least a week. They would need to first make a short-list, compare features, watch product reviews on youtube, check out the manuals, discuss it with us and then decide. Obviously this applies to big ticket purchases only. One need not research over a bar of chocolate (although it won't hurt to do so!).

It has to be their call, but an informed one. The benefits of insisting on this early in their lives will show up when they are ready to plan for taxes and make their first investments.

If we succeed in this regard, we can declare ourselves victorious for all practical purposes.

They will teach themselves the importance of not making impulsive buys, of research for product features, of reading fine print etc.

If it is a big-ticket or affordable purchase, we can ask them to wait a few months while we save for it. Start an RD or invest in a liquid fund etc. If the kid is interested, we can ask him/her to use a goal planner and figure out the amount needed. They will need to worry about interest rates. They can search for this as well. We can push as much as they are willing to take it.

Even in this day and age of online spending and investing, this little guy has a special place in instilling discipline.3) I am not a big fan of paying kids money for doing chores or even giving them pocket money.

Participating in household chores is mandatory for all family members and one cannot put a price tag to it.

As regards pocket money, I don't think it helps in anyway. I think it is a bad idea to give kids some , 'do whatever you want money'.

4) Budgetting should be a family activity. It was until a couple of years back in my family. When my kid grows up a bit, I should restart that. Kids should see (hopefully observe; they usually do) how the monthly income is segregated into different compartments (expenses, investments and liabilities). Hopefully, they might ask a nice question like, "why do you invest?". Perhaps we should also throw in some light jargon like, investing, saving, wants, needs etc to get them curious.

5) What about investing? There is no flaming hurry to teach about equity, stocks, PPF etc. I think it is enough if the parents discuss investments in their presence.

6) The importance of giving is more important than spending or investing. We will need to regularly engage them and ourselves in charity events, donate to organisations, volunteer if possible.

7) Transparency is key. Even if we make small purchases, my wife and I always tell each other about it. Not permission, just information. I think our children should also encouraged to do the same – to us until they start earning and to themselves and their spouses later on.

Update:

We have been teaching our child the need for money and how transactions works. He now understands that money is transacted in a shop in exchange for goods. He surprised us with his definition of a customer: “someone who has money”.

Here is a couple of videos that 15-year-olds might follow with a little bit of hand-holding (assuming one can get them to sit down and watch them for 43 and 30 minutes respectively)

William Ackman: Everything You Need to Know About Finance and Investing in Under an Hour

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I have been interested in this particular area for a while. I observed my own behavior with money when u started earning vs my friends were different because of the money blue print I had vs my friends. The money blue print forms as a kid, and it is by observing and handling money in family they form on their own is my thought. If kids are asked to make a tough choice of choosing one among the two or three things they ask from a limited money they can get from parents, this creates the thought of money is limited resource and I have to prioritize unconsciously over a period of time. Making them do choose and identify choices with scarcity instead of doing it for them teaches well than explaining them the importance. Great article Pattu sir, as always enjoyed it.

I have been interested in this particular area for a while. I observed my own behavior with money when u started earning vs my friends were different because of the money blue print I had vs my friends. The money blue print forms as a kid, and it is by observing and handling money in family they form on their own is my thought. If kids are asked to make a tough choice of choosing one among the two or three things they ask from a limited money they can get from parents, this creates the thought of money is limited resource and I have to prioritize unconsciously over a period of time. Making them do choose and identify choices with scarcity instead of doing it for them teaches well than explaining them the importance. Great article Pattu sir, as always enjoyed it.

Good one Prof. One thing which I felt was missing in article was the family values & discussions about money.Kids learn more from what they see than what they read or our taught. Is parents are having multiple credit cards and swiping at every turn what message does the kid gets. If parents are always saying Money is the root of all problems child will get that attitude. My parents indirectly taught us to spend as per our own pockets. We did ,when credit cards came we modified the approach use credit cards but pay in full.

I am not comfortable talking about values. You got have to some some to write about it. Discussions about money are missing from the article because I too believed children learn more from observation.

Good one Prof. One thing which I felt was missing in article was the family values & discussions about money.Kids learn more from what they see than what they read or our taught. Is parents are having multiple credit cards and swiping at every turn what message does the kid gets. If parents are always saying Money is the root of all problems child will get that attitude. My parents indirectly taught us to spend as per our own pockets. We did ,when credit cards came we modified the approach use credit cards but pay in full.

I am not comfortable talking about values. You got have to some some to write about it. Discussions about money are missing from the article because I too believed children learn more from observation.

resp sir it is really good to read traditional wisdom ideas in your blog,more for us GUJARATIS,LIKE OUR PRIME MINISTER NARENDRA MODI SAID business & traditional money wisdom is in our DNA.i WILL ADD ONE THING FROM MY EXPERIENCE.I HAVE KIDS PURSUING C.A COURSE AGED 21 FEMALE & 18 MALE.WHAT I HAVE OBSERVED IS-THEY ARE BEYOND SPOON FEEDING STAGE,WHAT THEY LEARN IS DIRECTLY FROM MY ACTIONS.sO I MUST BE MORE DISCIPLINED & RIGHT ROLE MODEL SO FAR AS MONEY MATTERS.NOT MY ADVICE ,BUT MY ACTIONS ADVISE THEM IN MONEY MATTERS. WISH YOU ALL, ALL THE BEST DR RAJANIKANT V GAJJAR BHARUCH GUJARAT

resp sir it is really good to read traditional wisdom ideas in your blog,more for us GUJARATIS,LIKE OUR PRIME MINISTER NARENDRA MODI SAID business & traditional money wisdom is in our DNA.i WILL ADD ONE THING FROM MY EXPERIENCE.I HAVE KIDS PURSUING C.A COURSE AGED 21 FEMALE & 18 MALE.WHAT I HAVE OBSERVED IS-THEY ARE BEYOND SPOON FEEDING STAGE,WHAT THEY LEARN IS DIRECTLY FROM MY ACTIONS.sO I MUST BE MORE DISCIPLINED & RIGHT ROLE MODEL SO FAR AS MONEY MATTERS.NOT MY ADVICE ,BUT MY ACTIONS ADVISE THEM IN MONEY MATTERS. WISH YOU ALL, ALL THE BEST DR RAJANIKANT V GAJJAR BHARUCH GUJARAT